NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 12a0076n.06

No. 10-5927

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

L-S INDUSTRIES, INC.,

Plaintiff/Counter-Defendant/Appellee

v.

J. CHRISTOPHER MATLACK,

Defendant/Counter-Plaintiff/Appellant

v.

WILLIAM HUGHES

Counter-Defendant/Appellee

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ON APPEAL FROM THE

UNITED STATES DISTRICT

COURT FOR THE EASTERN

DISTRICT OF TENNESSEE

O P I N I O N

BEFORE: MOORE and GRIFFIN, Circuit Judges; and QUIST, Senior District Judge.*

Quist, District Judge.

I. BACKGROUND

After a four-day jury trial, the jury found that Defendant Matlack had breached his fiduciary

duty of loyalty to his former employer, Plaintiff L-S Industries (“LSI”), and awarded LSI $131,500. 

The jury also found that LSI and Counter-Defendant William Hughes, President of LSI, had

breached the contract according to which Matlack received his bonus compensation. The jury

Honorable Gordon J. Quist, United States Senior District Judge for the Western District of *

Michigan, sitting by designation. 
awarded Matlack $130,500 for his breach of contract counter-claim. The district court denied

Matlack’s motion for prejudgment interest on his $130,500 jury award. (R. 123.) The sole issue on

appeal is whether the district court abused its discretion in denying Matlack prejudgment interest on

his breach of contract award.

II. ANALYSIS

The district court had subject matter jurisdiction in this diversity case pursuant to 28 U.S.C.

§ 1332. “There is no dispute that in a diversity action the question of prejudgment interest must be

determined under state law.” Daily v. Gusto Records, Inc., 14 F. App’x 579, 591 (6th Cir. 2001)

(citing Mass. Benefit Ass’n v. Miles, 137 U.S. 689 (1891)). 

The award of prejudgment interest is within the sound discretion of the trial court, and the

decision will not be disturbed upon appellate review unless the record reveals a manifest and

palpable abuse of discretion. Engert v. Peerless Ins. Co., 382 S.W.2d 541, 550-51 (Tenn. Ct. App.

1964); see also GentekBldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 333 (6th Cir. 2007)

and Sparton Tech. Inc. v. Util-Link, LLC, 248 F. App’x 684, 693 (6th Cir. 2007) (applying Tennessee

law). “Generally stated, the abuse of discretion standard does not authorize an appellate court to

merely substitute its judgment for that of the trial court.” In re Estate of Ladd, 247 S.W.3d 628, 645

(Tenn. Ct. App. 2007) (citing Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998)). “A trial

court acts within its discretion when it applies the correct legal standard and reaches a decision that

is not clearly unreasonable.” Bogan v. Bogan, 60 S.W.3d 721, 733 (Tenn. 2001).

First, the district court identified the correct legal standard. The Tennessee Supreme Court

in Myint articulated the following standard regarding the award of prejudgment interest:

Several principles guide trial courts in exercising their discretion to award or deny

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prejudgment interest. Foremost are the principles of equity. Tenn. Code Ann. § 47-

14-123. Simply stated, the court must decide whether the award of prejudgment

interest is fair, given the particular circumstances of the case. In reaching an

equitable decision, a court must keep in mind that the purpose of awarding the

interest is to fully compensate a plaintiff for the loss of the use of funds to which he

or she was legally entitled, not to penalize a defendant for wrongdoing.

Myint, 970 S.W.2d at 927 (citations omitted) (emphasis added); see also Tenn. Code. Ann. § 47-14-

123 (authorizing trial courts to award prejudgment interest “in accordance with principles of

equity”). Moreover, “[t]rial courts are afforded a great deal of discretion and are entitled to

deference regarding the determination of whether to award prejudgment interest.” Int’l Flight Ctr.

v. City of Murfreesboro, 45 S.W.3d 565, 573 (Tenn. Ct. App. 2000) (citations omitted). 

Second, the district court applied this principle in a reasonable manner; the record certainly

does not reveal a manifest and palpable abuse of discretion. In accord with Myint, the district court

said that under the “particular circumstances” of this case it would be “unfair” to award prejudgment

interest to Matlack because, given the jury award, Matlack did not need to be more “fully

compensated.” Moreover, under the circumstances, awarding Matlack prejudgment interest would

“penalize” LSI, rather than more fully compensate Matlack. These are entirely reasonable assertions

given the jury’s findings and overall decision to award LSI more money than Matlack. In sum, the

district court exercised its discretion by weighing the equities of the case to decide that prejudgment

interest would be unfair in this instance. 

Matlack’s argumentsthat the district court applied the incorrect legal standard are unavailing.

First, in Scholz v. S.B. International, Inc., 40 S.W.3d 78 (Tenn. Ct. App. 2000), the court gave three

examples where prejudgment interest may be inappropriate, but it did not limit a court’s ability to

deny prejudgement interest in only those three circumstances. Id. at 83 (“Prejudgment interest may

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at times be inappropriate such as. . . .” (emphasis added)). Indeed, the three circumstances in Myint

do “not represent an all inclusive list of the reasons that could justify a court’s denial of prejudgment

interest.” Story v. Lanier, 166 S.W.3d 167, 182 (Tenn. Ct. App. 2004). Second, Matlack’s argument

that the district court applied a Tennessee Rule of Civil Procedure simply because the district court

used the words “prevailing parties” is conjecture. As discussed, the district court applied Myint,

which is still the controlling substantive law in Tennessee on this matter. 

III. CONCLUSION

The district court did not abuse its discretion by denying Matlack prejudgment interest. 

Therefore, the district court is AFFIRMED. 

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